2009-11-21

Canadian bankruptcies soar in
September

Latest Canadian bankruptcy statistics

Total Canadian bankruptcies in
September (12,792) were significantly higher than both last month
(9,909) and one year ago (8,836). This is a new record monthly high
in the 11 years of data I have available. Link to September 2009
report:

The following table shows monthly data
for 2008 and 2009 so far. The total number of bankruptcies is
adjusted to current population. The column on the right is a trailing
6 month average, which eliminates the monthly volatility and paints a
better picture over time:

Month

Bankruptcies

Per
100k pop

Trailing
6 mos

2008-01

7,050

21.14

21.28

2008-02

7,774

23.31

21.48

2008-03

7,301

21.89

21.67

2008-04

8,627

25.87

22.05

2008-05

7,918

23.74

22.17

2008-06

7,478

22.42

23.06

2008-07

7,908

23.71

23.49

2008-08

7,446

22.33

23.33

2008-09

8,836

26.41

24.08

2008-10

9,468

28.30

24.49

2008-11

8,669

25.87

24.84

2008-12

8,299

24.73

25.23

2009-01

8,392

24.98

25.44

2009-02

9,495

28.23

26.42

2009-03

11,085

32.92

27.51

2009-04

11,465

34.05

28.46

2009-05

10,364

30.72

29.27

2009-06

11,338

33.60

30.75

2009-07

10,726

31.75

31.88

2009-08

9,909

29.31

32.06

2009-09

12,792

37.79

32.87

Long term view

This monthly data continues to show a
steady up-trend in Canadian bankruptcies. Bankruptcies started
rising in 2008 and have now accelerated in 2009. Rising bankruptcies
will likely correlate with more bad loans in the financial system and
declining credit quality. Aggressive cuts in policy interest rates to
historical lows, and stimulus efforts, appear to have had no positive
impact on consumer bankruptcies.

I expect that rising bankruptcies and
bad (impaired) loans will hurt bank profitability, as lending is the
backbone of traditional banking. In recent months, banks have seen
windfall profits from trading and rising asset prices, largely
offsetting this deterioration in lending.